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EU sets stage for fight on chemicals

The European Parliament's powerful environmental committee approved tough new rules Tuesday regulating the bloc's €400 billion chemical industry, presaging a tense showdown between the European Union and the world's biggest chemical companies, which argue that the regulations risk damaging business and hurting global trade.

At issue is EU legislation, known as Reach, for the registration, evaluation and authorization of chemicals, which would shift the burden of proof from regulators to businesses when it comes to the safety of up to 30,000 commonly used industrial chemicals.

The legislation has become the most dramatic example of Europe's "precautionary principle" of regulation. In contrast to the U.S. approach, it requires businesses to show that the substances they put on the market are safe, rather than requiring regulators to prove why they should be banned.

The U.S. government initially feared that $150 billion of its exports could be affected. The U.S. chemical industry has estimated that the proposal could cost U.S. companies alone some $8 billion during the next decade. But EU lawmakers counter that all chemical companies will need to either conform to the EU's more stringent standards, or risk missing out on a European market of 470 million consumers, which is now larger than the United States.

Products ranging from certain plastics to some materials used by pharmaceutical companies could be affected, as well as industrial solvents like ethyl benzene and heavy metals like cadmium used in some paints. A number of low-risk substances like the polymers used in food packaging and shopping bags are likely to be totally or partly exempted from registration requirements.

The legislation has caused such concern in the United States that, in April 2004, the secretary of state then, Colin Powell, sent out a seven-page cable to U.S. embassies in all of the EU's 25 member states questioning the legislation's overly cautious approach and warning that it "could present obstacles to trade and innovation." Some European governments, including Germany, Britain and France, have also expressed fears that it could dampen the bloc's competitiveness.

Some nongovernmental organizations like Greenpeace charge that German industry, led by the chemical and pharmaceutical giant Bayer, used its sway to try and water down the legislation that was first discussed by ministers in 1998. Margot Wallstrom, deputy president of the European Commission and the former environment commissioner, described the lobbying as the most intense that she had experienced.

In the draft rules adopted by the Parliament's environmental committee, which still must be approved by the Parliament as a whole and by EU member governments, EU lawmakers have backed regulations forcing chemical companies to substitute dangerous chemicals with safer alternatives if such alternatives exist. The rules are designed to protect consumers from the potentially hazardous effects of chemicals found in everyday products.

Guido Sacconi, an Italian lawmaker from the Socialist Group who is steering the package through Parliament, said, for example, that toxic chemicals found used in a ballpoint pen would potentially need to be substituted if a safer alternative were available, even if the pen had been on the market for years and the substitute was more expensive to produce.

"There are possibly toxic substances in this pen," he said, waiving his pen in the air at a press conference. "If a safer alternative is available, then it should be substituted." He added that the additional cost to the chemical industry of using a safer and more expensive substance would be more than offset by the alternative of being forced to close factories producing a chemical deemed to be unsafe. He noted, however, that a hazardous substance could be allowed if the benefits outweighed the risks.

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But industry fears that the strict criteria and inherent cautiousness of EU regulators could lead to the banning even of substances that have clear benefits for public health. The registration process could prove onerous, they charge, and could compromise trade secrets.

Franco Bisegna, head of government affairs at the European Chemical Industry Council, said the substitution rule was an unfair burden on business. Citing a hypothetical example, he said that if a flame retardant used in the upholstery of an airplane passenger seat was deemed to be risky by the EU, a company could be forced to stop using it or to substitute it, at potentially enormous cost.

"What if the flame retardant was banned and there was no substitute?" he said. "It's better to have an airline seat with antiflame retardant than one that would be vulnerable in case of fire -we need to look at the social benefits as well as the risks." The chemicals industry is also concerned about proposals by the Parliament forcing chemical companies to review permits for the most hazardous substances every five years. Under the rules, manufacturers would also have to register the properties of chemicals in an EU database.

But EU lawmakers counter that the tougher standards will prevent as many as 4,500 deaths a year. They say that the safety benefits for consumers more than outweigh the added costs to business. EU regulators said the tougher standards would cost as much as €5.2 billion, or $6.5 billion, to producers and users over 15 years, when they introduced the legislation in 2003.

Bisegna said that the regulations would affect all multinational chemical companies doing business in Europe and that U.S. fears about the legislation were exaggerated.

"If Reach is supposedly going to make European chemical producers less competitive, then shouldn't the U.S. be happy?" he asked. "If industry can't solve its competitiveness problems, I don't think it will be Reach that will have given it its kiss of death."

Reach would require the chemicals industry to test the safety of the 30,000 or so chemicals that have been on the market across the world without any significant testing of their toxicity on human health and the environment. These substances would require registration with an EU agency.

Only about a third of 140 potentially high-risk substances on the market before 1981 underwent full assessments, according to the commission.

The European Parliament is planning a final vote on the directive in November or December; if approved, the directive then must be cleared by EU member governments. That still leaves time for the lobbying process to continue.